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Research and Development Tax Relief: Is Your Business Eligible to Claim?


bespoke - January 25, 2021

A world-class innovation economy raises living standards, provides solutions to society’s biggest challenges, and will drive a digital-first economic post-coronavirus recovery. There are obvious benefits for the UK government to incentivise innovation – which is exactly what it does with Research and Development (R&D) tax reliefs.

How do R&D tax reliefs work? 

R&D tax credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by reducing a company’s tax bill by an amount equal to a percentage of the company’s qualifying R&D expenditure or by the payment of a credit, again linked to the company’s qualifying R&D expenditure.

There are two schemes for claiming relief:

  • Small or Medium-sized Enterprise (SME) Scheme; and
  • Research and Development Expenditure Credit (RDEC)

You can claim SME R&D relief if you’re an SME with:

  • Less than 500 staff
  • A turnover of under £100 million or a balance sheet total under £86 million

Large companies are able to claim via the RDEC.  

SMEs are able to claim up to 33p for every £1 spent on qualifying R&D activities. The average claim made by SMEs in the UK is £57,228 (2018-19).

Is your business entitled to make a claim?

To qualify for R&D relief, your business needs to prove that it has entered into a project to make an advance in science or technology – that is effectively the government’s definition of innovation.

The project must relate to your company’s line of work. For instance, you need to prove that there are commercial benefits to the project.

In making your case for R&D tax relief, you will need to prove your project:

  • Looked for an advance in science and technology (and not just for your business benefit)
  • Had to overcome uncertainty
  • Tried to overcome this uncertainty
  • Could not be easily worked out by a professional in the field

R&D relief can also even be claimed on unsuccessful projects.

As per the latest figures from HM Revenue & Customs, published in September 2020, there have been 59,265 R&D tax credit claims for 2018-19, of which 52,160 are in the SME R&D scheme.

That breaks down to £5.3bn of R&D tax relief support having been claimed for 2018-19 (as of June 2020), corresponding to £35.3bn of R&D expenditure. 

The ‘Manufacturing’, ‘Professional, Scientific & Technical’ and ‘Information & Communication’ sectors had the greatest volume of claims, making up a total of 66% of claims and 71% of the total amount claimed for 2018-19. But the scheme is open to all businesses, in all sectors.

At Bespoke Commercial Finance, we can help you work out if you have grounds to apply for R&D tax relief. Get in touch today to find out what we can do for you.